Non-Competes – Enforceable in Virginia?
Contrary to popular misconception, courts in the Commonwealth of Virginia continue to enforce non-compete agreements. It is true that the Supreme Court of Virginia has gradually tightened the standards that non-compete agreements must meet in order to be enforced by the lower courts in Virginia. However, the Supreme Court has also mandated that the lower courts conduct evidentiary hearings (i.e. trials) before dismissing non-compete lawsuits in order to review the unique facts of each case. As a result, ex-employees are faced with protracted and expensive litigation if the employer decides to sue, regardless of whether the non-compete agreement is ultimately held to be enforceable. One could argue that employers actually have more power today than ever before.
What makes a non-compete agreement enforceable in Virginia? The Supreme Court of Virginia has set out a three-pronged test, requiring the restraint to be reasonable and:
1. Not greater than necessary to protect the employer in some legitimate business interest;
2. Not unduly harsh and oppressive in curtailing the employee’s legitimate efforts to earn a livelihood; and
3. Not contrary to sound public policy.
In assessing the first prong, a court will consider the geographic scope of the non-compete agreement, the types of restricted activities, and the duration of the non-compete period. The courts require that: (a) the restricted territory bear a relationship to the reach of the employer’s business and the area in which the employee worked; (b) the restricted activities be the same type of activities that the former employee actually engaged in; and, (c) the time period be limited and defined to periods that are reasonable on a case specific basis.
Unfortunately, the application of this test is fraught with uncertainty for all parties involved. The leading example of this uncertainty is illustrated by two cases that came before the Virginia Supreme Court involving the same employer and same non-compete agreement: Home Paramount Pest Control v. Rector (1989), and Home Paramount Pest Control v. Shaffer (2011). In the 2011 case, the Court declined to enforce the same non-compete agreement that it enforced in the 1989 case.
A skilled lawyer can draft a non-compete agreement that meets the standards of enforceability established by the Supreme Court of Virginia, and can provide a reasoned opinion regarding the enforceability of an existing non-compete agreement. However, no attorney can guaranty with certainty that a non-compete agreement will or will not be enforced by a Virginia court. Unfortunately, for employees, the litigiousness of the employer will often dictate the outcome for the parties.
This is the first of two articles on the subject of non-compete agreements. Look for the second article in December 2017.
We Can Help
The attorneys of Gross, Romanick, Dean & DeSimone, P.C. have a great deal of experience drafting non-compete agreements and litigating non-compete cases. In addition, our attorneys regularly review existing non-compete agreements for individuals and businesses to analyze the probable outcome of litigation to enforce the same.
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Gross, Romanick, Dean & DeSimone, P.C. is a law firm located in Fairfax, Virginia. Since 1980, our attorneys have dedicated themselves to providing cost efficient legal services to individuals and businesses in Northern Virginia and the Washington, D.C. Metro Area. We meet our clients’ needs by applying hard work with integrity to find creative and practical legal solutions. Our extensive business litigation experience, and our understanding of the transactional mistakes that often lead to expensive courtroom battles, helps us to advise our clients on business deals and the resolution of commercial disputes. To learn more about our firm, visit: www.grddlaw.com or call us at 703-273-1400